The Journal of Economic Literature, a publication of the American Economics Association, maintains a guide to 'Classification Codes' by which economists identify their field of research. This blog will center on code A130 - the Relation of Economics to Social Values.

Monday, October 19, 2015

All of the talk about how the market model and free markets and orthodox economics always resulting in the best for society are based upon a very precise, detailed economic model of the economy. At its fundamental level, that model is based upon there being many, many producing firms, so many firms that the loss of one or the addition of one would have no impact upon the market. If that condition is not met, then it can be shown, by that very same model, that losses are generated to society. So what do we have? We now have a Justice Department that is raising the standard against which market concentration is measured; this move makes it possible for fewer and larger firms to be declared "safe for healthy competition". People need to realize that more market power, which firms gain when they are allowed to merge and control larger and larger segments of the market, always results in higher prices and diminished consumer surplus. What ends up happening is that shareholders get wealthier and consumers get less. Why does this happen? Let's ask Congress how much they get from lobbyists representing the merging companies and industries where lots of merger activity occur. Congress is no longer ruled by the electorate, they are owned by large corporate interests. Congress no longer cares about doing what is correct for the people because economists have given them the language to make everything appear ok and allow them to feel ok about accepting "advice" from large corporations that are looking out for shareholders and do not give a d___ about the customer.